Mutual Fund Voting on Environmental and Social Proposals

48 Pages Posted: 26 Nov 2018 Last revised: 15 May 2019

See all articles by Yazhou He

Yazhou He

Oxford University Centre for Corporate Reputation

Bige Kahraman

University of Oxford - Said Business School; Centre for Economic Policy Research (CEPR)

Michelle Lowry

Drexel University

Date Written: December 7, 2018

Abstract

Over the 2004 – 2016 period there have been over 1,600 shareholder proposals related to environmental and social (ES) issues, with slightly more than half sponsored by asset management companies. In recent years, ISS has supported about 60% of these proposals, yet support among mutual funds is less than 20%. Funds’ focus on factors other than long-term value maximization contribute to this difference. Mutual funds that are less myopic and that are less influenced by management recommendations are more likely to vote for ES proposals, especially those sponsored by asset management companies. Despite apparent biases within some funds, overall mutual fund support is informative regarding ES risks. Consistent with virtually none of these proposals passing and managers not voluntarily adopting the initiatives, higher mutual fund support for ES proposals predicts deterioration in ES scores and extreme negative returns over the following years.

Keywords: shareholder proposals, voting, mutual funds, environmental, social

Suggested Citation

He, Yazhou and Kahraman, Bige and Lowry, Michelle B., Mutual Fund Voting on Environmental and Social Proposals (December 7, 2018). Available at SSRN: https://ssrn.com/abstract=3284683 or http://dx.doi.org/10.2139/ssrn.3284683

Yazhou He

Oxford University Centre for Corporate Reputation ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

Bige Kahraman

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Michelle B. Lowry (Contact Author)

Drexel University ( email )

Philadelphia, PA 19104
United States
215-895-6070 (Phone)

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